The following is a rush transcript of the February 17, 2013, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace.

Senate Republicans block the president's choice to run the Pentagon.

(BEGIN VIDEOTAPE)

WALLACE: As GOP senators demand more answers about the Benghazi terror attacks, the White House charges they are playing politics with national security. We'll talk with the man leading the call for more information, Senator Lindsey Graham.

Then, his Tea Party response to the State of the Union speech was critical of both the president and the GOP. We'll ask Senator Rand Paul what he thinks of the Obama agenda, as well as Republican policy.

And, our power player of the week helps the Senate make history, by keeping track of history.

All, right now, on "Fox News Sunday."

(END VIDEOTAPE)

WALLACE: And hello, again, from Fox News in Washington.

Senate Republicans made history this week blocking a nominee for defense secretary for the first time ever. They are demanding more information about the nominee, former Senator Chuck Hagel, and about the Benghazi terror attack.

Joining me now, one of the senators leading the charge, Republican Lindsey Graham of South Carolina.

Senator, you were telling me just before we went on the air that you've just gotten some new information about Chuck Hagel. What is it?

SEN. LINDSEY GRAHAM, R-S.C.: Well, on the day of the vote, there was a blog posting about a speech I think in 2007 or 2008 that Chuck Hagel made at Rutgers University, and the blogger was a supporter of Senator Hagel. He was thinking about running for president and he put on his blog the next day six points of the speech, question-and-answer session. And point six was allegedly Senator Hagel said that the U.S. State Department was an adjunct of the Israeli foreign minister's office, which I think would be breathtaking if he said that, had such a view.

I got a letter back from Senator Hagel, in response to my question, did you say that and do you believe that? And, the letter says he did not recall saying that. He disavowed that statement.

WALLACE: Is that enough for you?

GRAHAM: Well, if in fact that's true, that would end that matter because he previously said in a book that the Jewish lobby intimidates members of Congress, particularly the U.S. Senate and makes us -- pushes us to make very bad decisions. If the second statement were true, he said, the secretary of state's office is under the control of the Israeli foreign ministers, those two together, would show edge our view of the Israeli-U.S. relationship way out of mainstream.

So, I'll just take him at his word unless something new comes along.

WALLACE: Senate Democrats, as you know, say you are playing politics with national security.

Here's what President Obama said.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: It's just unfortunate that this kind of politics intrudes at a time when I'm still presiding over a war in Afghanistan, and I need a secretary of defense who is coordinating with our allies to make sure our troops are getting the kind of strategy and mission that they deserve.

(END VIDEO CLIP)

WALLACE: Even if you allow Hagel to be confirmed in a week when you come back from recess, do you worry at all, Senator, that he will be damaged and therefore less effective dealing with Congress and dealing inside the Pentagon?

GRAHAM: I would worry about a Congress being jammed, to support a nominee that the Washington Post said is to the left of the Obama administration's foreign policy agenda, is on the fringe of the senate. You are talking about a person whose voting record shows softness on Iran and antagonism toward Israel beyond belief. He'd be the most antagonistic senator toward the state of Israel in history.

So the fact that we reported (ph) him on Tuesday, and they wanted a cloture vote Thursday, to me was unreasonable. We voted Senator Kerry on the same day because there was no controversy and we offer to the White House to hold the vote until after the break, and, if there are nothing new came out, we'd all vote for cloture, Senator John McCain and myself. But that wasn't good enough and they wanted to force this issue.

So I'm glad that we have got more time to look and I'm glad he answered my question, about a very disturbing comment he allegedly made.

So I think we're doing our job to scrutinize, I think, one of the most unqualified, radical choices for secretary of defense in a very long time.

WALLACE: Well, let me ask you a question about that. If he is so radical and if he's unqualified, if you get the information you are seeking on him, and on Benghazi -- we'll get to that in a moment -- why wouldn't you still continue to try to block him?

GRAHAM: Well, because I do believe the president has great deference and here's the question for our country, can we do better than this? I think so.

The president chose the controversial nominee that refuses to sign letters supporting Israel during the 200 Fatah, refused to designate that Iranian revolutionary guard a terrorist organization, refused to sign a letter asking the E.U. to designate Hezbollah as a terrorist organization -- the list goes on and on and on.

But at the end of the day, this is the president's decision, I give him great discretion and I can't believe one Democratic colleague is not upset by this choice, enough to speak out.

WALLACE: Now, one of the other things you want and you are using the nomination as leverage, is to get more information about Benghazi, the president says that that's all about politics. Take a look at this.

(BEGIN VIDEO CLIP)

OBAMA: We've had more testimony and more paper provided to Congress than ever before, and, Congress is sort of running out of things to ask.

(END VIDEO CLIP)

WALLACE: Question: tell me the single most important thing that after all of these months you still don't know about Benghazi?

GRAHAM: Well, it's pretty hard. Let's start with after. We don't know who changed the talking points to take the references to al Qaeda, or the talking points given to Susan Rice. We don't even know who the survivors of the attack are so that Congress can interview them. How in the world could the president and Susan Rice suggest this was not a pre-planned terrorist attack when the secretary of defense and the chairman of the Joint Chiefs testified before Congress just a week ago that they knew on the night of the attack it was a terrorist attack?

There are so many unanswered questions. The FBI interviews --

(CROSSTALK)

WALLACE: Senator, let me pick up on one of them I find, frankly, quite astonishing. What is the administration's explanation for the fact the FBI interviewed the survivors, all the Americans who safely got out of Benghazi, right after the attack, months ago, and that they refused to give the transcripts of the interviews to Congress. What's their explanation for that?

GRAHAM: This is an ongoing criminal investigation is what they told me. We are going back to the law enforcement model, where we're treating al Qaeda as sort of a mafia, common criminal element rather than enemy combatants.

And here's what was really stunning, the FBI interviewed the survivors, two days after the attack in Germany and, the CIA never called the FBI for weeks, wanting the results of the interview before they made their assessments -- we are going back to the pre-9/11 mentality of -- where we treat it as a law enforcement function, and FBI and the CIA never talk to each other, which is very dangerous.

Benghazi was system failure, before, during and after.

WALLACE: Senate Republicans are also talking about holding up the nomination of John Brennan, the president's chief counterterrorism adviser, to head the CIA. And, Rand Paul, your colleague, who will be on after the break, says one of the things he wants to ensure is that a president can't order a drone attack against an American citizen without a judicial review.

Is Senator Paul wrong?

GRAHAM: Well, I think the worst thing in the world is to have the courts decide who to target in the war on terrorism. Courts are not military commanders, the commander-in-chief has the right under our laws and authorization to use military force to designate the enemy. I think we need drones to patrol our borders, but I don't think he needed a drone an al Qaeda operative inside the United States.

We are using drones where there's really no soldiers, along the Afghan-Pakistan border.

But I very much believe we're at war and any American citizen who aides al Qaeda should be treated an enemy combatant, not a common criminal. We have done that in every war, and drones are just a tactical weapon in the overall war.

WALLACE: When Congress gets back from recess, the week after this one, you're going to have just five days to try to deal with the sequester, the $85 billion in automatic spending cuts that kick in on March 1st.

Now, some Republican leaders say if it comes down to a choice, between sequester, cuts, $85 billion, that are split evenly between the domestic side and military, Pentagon spending, or, the president's demand for an increase in taxes, then let the sequester happen. Are they wrong about that?

GRAHAM: Oh, I think so. I think we should have in a bipartisan fashion stop sequestration before -- in the words of the secretary of defense -- it destroys the Pentagon.

But we can cut $1.2 trillion over the next decade without destroying the Defense Department if we choose. The president promised in the campaign sequestration would not happen. Now, he is allowing it to happen. He's raising taxes to pay for half of it, and the other half comes from further defense cuts -- we already cut $489 billion -- and taking money out of the farm bill. So, when the president said at the State of the Union, we've already cut spending by $2.5 trillion, that's absolutely a misleading statement.

WALLACE: Why?

GRAHAM: Well, because, we haven't. We haven't done anything with sequestration yet, instead of cutting spending by $1.2 trillion. He's now suggesting we raise taxes, by $600 billion and cut the Pentagon yet again, and, go to the farm bill.

That's the only area that they are willing to cut. So we haven't cut $2.5 trillion, because, the sequestration is now going to be replaced by tax cuts, and further defense spending, and it's only 19 percent of the budget.

But, you know, sort of back to this Benghazi thing and this administration being transparent and being honest to the American people, this president can say almost anything he wants with a few notable exceptions and get away with it. We still have no idea what the president did, when secretary -- during the night of September 11th -- and when Secretary Clinton said she had a clear idea of the threats we faced in Libya, the secretary of defense and chairman of the Joint Chiefs said they knew that night it was a terrorist attack and knew of the reporting coming out of Libya, from Ambassador Stevens, who said we cannot defend the consulate.

She was not clear-eyed, she was blind and deaf and the president of the United States never picked up the phone to call anybody in Libya to help these poor people under attack. The first ambassador killed in 30 years.

They withheld information. I think manipulated the evidence after the attack to create a political narrative rather than sharing with the public the truth about an al Qaeda attack that was pre- planned and pre-coordinated.

We're going to get to the bottom of this.

WALLACE: Let me just ask you one more question about the sequestration before we let you go, Senator. You know that if we go into the sequester the president is going to hammer Republicans.

The White House has already put out a list of all the things, terrible things that will happen if a sequester kicks in: 70,000 children losing Head Start, 2,100 fewer food inspectors, small business will lose $900 million in loan guarantees.

And, you know, Senator, the president is going to say your party is forcing this to protect tax cuts for the wealthy.

GRAHAM: Well, all I can say is the commander-in-chief thought -- came up with the idea of sequestration, destroying the military and putting a lot of good programs at risk.

Here's my belief -- let's take Obamacare and put it on the table. You can make $86,000 a year in income and still get a government subsidy under Obamacare. Obamacare is destroying health care in this country. People are leaving the private sector because their companies cannot afford to offer Obamacare.

If you want to look at ways to find $1.2 trillion in savings over the next decade, let's look at Obamacare. Let's don't destroy the military and just cut blindly across the board. There are many ways to do this, but the president promised it won't happen.

He's the commander-in-chief and on his watch, we're going to begin to unravel the finest military in the history of the world, at a time when we need it most. The Iranians are watching us. We are allowing people to be destroyed in Syria.

So, I just really -- I'm very disappointed in or commander-in- chief.

WALLACE: Senator Graham, thank you. Thanks for joining us today. We'll be following both the sequestration and the Hagel nomination.

GRAHAM: Thank you.

Up next, the voice of the Tea Party, Senator Rand Paul, who gave his own response to the president's State of the Union speech.

(COMMERCIAL BREAK)

WALLACE: This week, he took on Democrats and Republicans in his Tea Party response to the president's State of the Union address.

Here with his critique of both parties is Senator Rand Paul of Kentucky.

And, Senator, welcome back to "Fox News Sunday."

SEN. RAND PAUL, R-KY.: Good morning.

WALLACE: We'll get to the president in a moment, but let's start with the Republicans. You say the sequester is fine, even the $40- plus billion that the Pentagon would take in military spending cuts. You just heard Senator Graham say, no, it isn't fine, that that would further jeopardize our national security.

PAUL: Well, ideally, we would have done the right thing, and that's pass appropriations bills and reduce spending where we think is fit.

The sequester is sort of a hammer. It was requested by the president. It was his idea, signed into law by him. So I think it is disingenuous for him to go back on it.

But, to put it in perspective, it's $1 trillion that over the next 10 years, spending will go up $9 trillion. So, even with the sequester, spending will still rise overall. So, the sequester really is a reduction in the rate of growth of spending, it's not a real cut in spending.

WALLACE: Senator Graham also says you are wrong, that the last thing we need -- talking about drone strikes -- that the last thing we need is a judge, second-guessing the commander-in-chief.

PAUL: I think we may need to make the question a little more precise. What I'm asking is about drone strikes on Americans, on American soil. The president will not answer that he cannot do this. In fact, he seems to be asserting that he can do this.

The law indicates that he can't. The CIA is not supposed to assassinate people on American soil. And, the Department of Defense is not allowed to act on American soil because of the Posse Comitatus Act.

So, the American law says they can't do this, but the president, all he will say is he doesn't intend to do this. That's sort of like him saying, oh, I don't intend to override the Second Amendment but I might. That is --

(CROSSTALK)

WALLACE: Let me interrupt for a second, because I thought that you were objecting to drone strikes on American citizens on foreign soil as well. Is that not true?

PAUL: I'm primarily asking, and the primary question is: Americans on American soil, can the president kill them with a drone strike from his program? It's blatantly illegal and I would think most Americans would want to be -- have their day in court.

And so, I disagree with Senator Graham. If you live in America, you ought to get your day in court before hellfire missile comes down on your house.

WALLACE: But I'm confused, sir, why would we need a drone strike? I mean, the reason for that is because we don't have people on the ground. If we knew where an al Qaeda operative was --

PAUL: You would think.

WALLACE: -- American or foreign, on U.S. soil, wouldn't we just go catch him?

PAUL: You would think.

But here's Brennan's response. He says the authorization to use force in 2001 in Afghanistan has no geographical limits. So, when he says that, our first question is -- gosh, he is implying he could do it in America. So, we sent him a written question.

Senator Wyden asked him a verbal question: can you kill an American on American soil? And he won't answer.

The president has now answered and says: I don't intend to do so. Well, that's pretty weak. I want him to say, absolutely, he will not kill Americans on American soil because we do strikes overseas that are sometimes not even targeted to an individual. We see a train -- a caravan coming out of a place we think people don't like America and we strike a train of vehicles without even knowing who they are.

But with Americans overseas, I also do have some objection in the sense that I would try them for treason. Awlaki was known and it was published that he was on a target list for months and months. He could have been tried in a federal court for treason for treason. He denounced America and, in all likelihood, he would have been swiftly convicted.

His son, though, was never tried. We killed his 16-year-old son and I don't think that that was appropriate.

PAUL: His son was never even accused of terrorism. The government won't even admit it was a mistake or an error, whatever it was. And I think that is wrong, you should get protection for being an American citizen.

WALLACE: Let me --

PAUL: Where I agree with Senator Graham, if you have a grenade launcher on your shoulder, by all means, and you're firing at Americans, you don't need due process. But if you are sitting in a cafe in Paris or Yemen, there should be a process where a judge decides your guilt, or a jury.

WALLACE: There is a growing battle inside the GOP. As you know, Karl Rove launched something called the Conservative Victory Project to get involved in primaries to make sure the party doesn't in the primary nominate somebody who can't win a general election.

Do you think that's a mistake?

PAUL: Well, you know, elections are a free marketplace and everybody has a right to participate in primary elections. What I would say is primary elections need not be selected by the party. In my case, and also in Senator Rubio's case, the party chose someone else. In Senator Rubio's case, they chose someone who is now a Democrat. So, it wasn't really a very good choice.

So, I would say is, let's have healthy primaries, and if people want to contribute on all sides, let people make voluntary contributions and we'll see which way it goes. But I think competitive primaries, you end up getting a good candidate, typically.

WALLACE: All right. Let's turn to the president's agenda. What's wrong with the idea the president laid out in the State of the Union that, yes, at this time particularly when we have a weak recovery, we need to spend more money? He calls it investment on education, on infrastructure, on research, especially when Mr. Obama says, if you make cuts in other places we won't add -- his words -- a dime to the deficit.

PAUL: Yes, he said that about 20 times in the last four years. Meanwhile, he added $6 trillion to the debt. I think it's really disingenuous.

He said in his speech he reduced the debt by $2 trillion. Well, he added $6 trillion and that means because he didn't add $8 trillion, he's reduced it by $2 trillion? That's absurd.

He listed about 50 new programs and says they're not going to cost you anything. We're going to squeeze the money out of the rich.

The problem is, is whenever he tries to squeeze more money out of the economy, he is slowing it down. We slowed down in the fourth quarter, and it's not because government spending is going down. Government spending is still going at pace. We still have plenty of government spending. In fact, we spent more the fourth quarter last year than the third quarter and we spent more than the previous year. We've never had a real cut in spending in recent history.

So I think he's just -- he's flat-out wrong.

WALLACE: But, as a matter -- whether it's right or wrong -- and, you know, it doesn't have anything to do with politics. As a matter of practical politics, isn't the president putting the Republican Party in the same spot he successfully put you in during the campaign, he's defending the middle class and you guys are protecting tax breaks for the wealthy?

PAUL: Right, and that's empty and false rhetoric. So, it's our job to explain to the American people that big government doesn't help the poor. Big government creates massive debt which causes your prices to rise. Your gas price is going up.

If you make $20,000 a year, and have two kids, you are poor and when your gas prices go from $3.20 to $3.80, that's President Obama doing that with big government and his debt.

If you are a senior citizen trying to save money, when your savings is sapped and you get no cost of living increase, that's President Obama doing that to your prices because his massive debt causes prices to rise.

WALLACE: Let's turn to immigration, because you talked about that in your official response on Tuesday.

Here's what you said: "We must be the party who sees immigrants as assets, not liabilities. We must be the party that says if you want to work, if you want to be an American, we welcome you."

Question, do you support the bipartisan "gang of eight" in the Senate, which has put together at this point kind of a blue print, an outline, for immigration reform, that says that they would allow people, the 11 million illegals to stay here. They would give them some legal status, not a path to citizenship but some legal status right away, and, once you get enforcement of the borders, then a path to citizenship?

PAUL: I do support immigration reform. I do support the concept of telling the 11 million people here that if you want to work, and you don't want to be on welfare, we're willing to find a place for you in America.

As far as the bipartisan proposal, I'll support it on one condition, and that's that we have a report that says the border is being secured but that report comes back and is voted on in Congress. And this is my idea I have been promoting and it will be an amendment or substitute for their bill, is that each year, over a five or six- year period, we have to have a report by an investigator general from the GAO that comes back and says, the border is secure.

But conservatives like myself have been for, step-wise, immigration reform if the border is secure. But I won't do it on a promise from President Obama. I think that's an empty promise and I frankly think that we need to trust but verify. And so, my amendment will have a report each year over five years that Congress actually has to vote on to say the border is secure.

WALLACE: Well, let me ask you about that because there is a White House draft of a comprehensive immigration plan that started circulating this weekend, which would allow the 11 million a path to citizenship without any linkage to border enforcement.

PAUL: This is the president torpedoing his own plan and shows me that he's really not serious. There are many people who think Democrats bring up these ideas as wedge issues. They don't really ever want to pass them because then they'd no longer have the Republicans to blame. So, really, they set themselves up for failure by putting something up as untenable.

I have come a long way forward on this issue. I am a very conservative senator. I'm someone who is -- someone who strongly believes in border security first, and I'm willing to come towards them and figure out a compromise on this.

But when they come out and adamantly say my way or the highway and, if Congress doesn't ask, I'll put it on the desk and say, pass it now -- that's no way to get it done. And then he'll blame it on us and it seems to me, to show that really the president doesn't want immigration reform.

WALLACE: Finally, let's talk about 2016. How serious are you about running -- you know what I'm going to ask -- running for president? And would it be to make a point as your father did, in his presidential runs, or would it be to win?

PAUL: I would absolutely not run unless it were to win. You know, points have been made and we'll continue to make points, but I think the country really is ready for the narrative coming, libertarian Republican narrative, also because we have been losing as a national party. We are doing fine in congressional seats but we're becoming less and less of a national party because we don't win on the West Coast, we don't win in New England. We really struggle around the Great Lakes.

I think people want a party that's a little bit less aggressive on foreign policy, still believes in a strong national defense but less aggressive. They want -- the young people want politicians who don't want them in jail for 20 years for a nonviolent drug position charge. So, they want a little bit different phase. I think people want a little different phase on immigration frankly. They don’t want someone somebody who wants to round people up, put in camps and send them back to Mexico.

WALLACE: Senator Paul --

PAUL: They don't give them welfare, either. I don't.

Excuse me?

WALLACE: Senator Paul, we got 30 seconds left. You sound like you are running.

PAUL: We won't make a decision until 2014 but I think I do want the party to become a national party again and not lose sight of how we grow as a party. So I will continue in that vein for a couple of years and then we'll decide.

WALLACE: By the way, we wanted to speak with a White House official today, about the president's agenda for the second term. But while new chief of staff Denis McDonough sat down with the other three Sunday shows, the White House turned down a request for him to answer our questions and explain the president's policies to all of you. We'll keep trying.

Up next, divisions within the GOP as one of our panelists angers the Tea Party base.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MARK LEVIN, RADIO TALK SHOW HOST: He's also up there with that stupid little third grade white board of his, with his fourth-grade writing style, talking about how they committed $30 million to Tea Party candidates. Bring on your little white board. We're ready!

(END VIDEO CLIP)

WALLACE: Conservative radio talk show host Mark Levin, mildly upset with Karl Rove's new plan to vet Republican candidates in future primaries. And it is time now for our Sunday group, the aforementioned former White House senior adviser, Karl Rove, Bob Woodward from the Washington Post and author of the book "The Price of Politics", Kimberley Strassel of the Wall Street Journal and Fox News political analyst, Juan Williams. Well, as we mentioned, Karl has helped launch the conservative Victory Project, which is going to make an effort in the primaries in 2014, to make sure that the Republican voters in those primaries elect people who are going to win in the general elections that has made the Tea Party and people who are supporting that part of the Republican Party, very upset. Karl, your reaction?

KARL ROVE, FORMER BUSH WHITE HOUSE SENIOR ADVISER: My personal favorite was when Mark Levin referred to me as queen for a day. I'm not certain exactly what he was talking about there, but ...

WALLACE: I don't think it was a compliment.

ROVE: I don't think so, either. But first of all, let's be clear, we did spend $30 million on behalf of Tea Party candidates, you had Rand Paul on and we're the largest outside group supporting Rand Paul, $2.9 million. And, Marco Rubio, I personally gave him my contribution to help raise money in the primary very early. We gave $25 million of support to Tea Party candidates in the House.

WALLACE: OK, but ...

(CROSSTALK)

WALLACE: -- Tea Party candidates are saying you are trying to beat them.

ROVE: No. No. No, some people associated with the Tea Party element. Look, Todd Akin was not a Tea Party candidate. Tea Partiers supported the other two candidates in the Republican primaries.

WALLACE: Todd Akin, the guy who said, legitimate rape in a Missouri ...

ROVE: Right. And our object is, to avoid having stupid candidates who can't win general elections, who are undisciplined, can't raise money, aren't putting together the support necessary to win a general election campaign, because this money is too difficult to raise to be spending it on behalf of candidates who have little chance of winning in a general election.

WALLACE: You say this as the Tea Party thinks -- the Tea Party think you are going after -- let me just -- let me just finish. So they say there were plenty of bad establishment candidates in North Dakota, in Virginia and Wisconsin, they say, a lot of them blew chances in races that they should have picked up ....

(CROSSTALK)

ROVE: I think that is right. Look, let's take case of Indiana where we had a candidate, Richard Mourdock, who lost the general election in a state that was comfortably won by Mitt Romney and reelected Republicans up and down the ballot. There are two people responsible for the loss in Indiana race, one of them is Richard Mourdock, who ran an undisciplined campaign, in which he said if a woman was raped and conceived a child, it was God's will. But there is another person to blame there, too, and with all due respect, Senator Lugar had lost touch with the voters of his state. He was registered to vote in a place he hadn't own since 1973, he's last gone home for a Lincoln Day dinner in the 1980s. The top leaders of his party and his state had never met him, and he rarely went home. And there comes a point at which even accomplished statesmen like that will -- will cause the loss of an election if they don't step aside and allow a robust, normal primary to emerge.

WALLACE: Bob, what does it say about the Republican Party when you have Karl Rove stepping in there to say we have got to try to police those Republican primary voters -- I mean, it's part of the process, I'm not saying there is anything wrong with that, but they are trying to police who Republican primary voters are going to pick to go up against Democrats ...

(CROSSTALK)

WALLACE: ... and let me just finish the question. And, when you have Marco Rubio, who is pretty conservative and a Tea Party favorite giving the Republican response, and the Tea Party thinks they have to have somebody else to give a response to the response?

BOB WOODWARD, THE WASHINGTON POST: My last book is going to be called "Some People Never Go Away," and Karl is going to get his own chapter.

(LAUGHTER)

WOODWARD: Because he never goes away. And ...

(CROSSTALK)

ROVE: I'm sorry.

WOODWARD: OK, maybe two chapters, because, you never know what the next bounce will be with you. But, what is interesting is the focus on money. I think the problem in the Republican Party is really not money. I think they've got lots of it. I think it is - theory of the case, why are we here, what is our message, how to connect to the real world and this idea about 30 million here, we're going to do that, I think is the wrong track.

WALLACE: Karl, your response.

ROVE: Well, I think he's right. I used the $30 million to prove that we were pro-Tea Party, but I think you are right. A lot of this is just simply examining these candidates, looking at their record, doing the kind of research on ourselves as the other side is already going to be doing and trying to have discussions behind the scenes among conservative groups as to how strong are these respective candidates, because look, there was a reason why Todd Akin won the primary, he won the primary because Harry Reid went in and spent $2 million attacking him as a conservative during the Republican primary. He said he never voted for a tax increase, he's always been pro-life, he's even supported a balanced budget amendment, too conservative from Missouri, and the object was nominate -- help nominate the weakest Republican candidate possible so they'd have a chance ...

(CROSSTALK)

WOODWARD: But you're going to set yourself up as a kind of politburo, vetting these candidates ...

ROVE: No, no, I mean ...

(CROSSTALK)

WOODWARD: I mean the whole theory of Republicanism is to let the local state or a district decide.

ROVE: I think Rand Paul had it right. Everybody has got a chance. We believe in markets. Let people go in and participate, we should -- it's just the opposite of politburo. The more people who participate, the better off we are. The more we examine the quality of these candidates from top to bottom, the more likely we end up with fewer Christine O'Donnells and more Rand Pauls.

WALLACE: OK, let's turn to the Hagel nomination. Kim, what do you make of the Republican Party's decision, to block, temporarily, but to block, the nomination of the Defense Secretary for the first time in our history.

KIMBERLEY STRASSEL, THE WALL STREET JOURNAL: Well, why wouldn't they? Look, in the end he's probably going to be confirmed, OK, but in the meantime this is an opportunity -- the president thought in nominating Chuck Hagel he was going to put this guy out there and kind of rub Republicans' noses in it a little bit, and he had chosen a GOP guy who believed in his philosophy. In the end, it has not really worked out as well for the president. His nomination hearing was a real disaster, he came across looking fairly incompetent, there's been so many questions raised about his history. So, the GOP says, let's delay this a little bit longer, keep the headlines on the White House, he'll probably come back and get confirmed at the end of the day. And in the meantime the president has to deal with this issue for a bit longer.

WALLACE: Juan, what about the Republican decision and what about their response, their justification, particularly on Benghazi, saying, that using this as leverage to get information, the White House is refusing to give them?

JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: Well, the question is what information they think is out there that has not been already acquired. And, the argument coming from the White House is, you keep changing. I mean, initially it was, oh, wait a second. You know, it's his opposition to the surge in Iraq or statements about Israel and Israel's influence on Capitol Hill. This morning, Senator Graham said to you there was some new information in the speech, you know, or notes about a speech. So, what you get is that, we have a weak period in which I think you have conservative politicians on the Hill, hoping something more might come out. But, appearing petty, because, as you pointed out, Chris, this is unprecedented, that you would block the Defense Secretary, and it allows the White House to say, this is creating instability. We have 66,000 troops still on the ground in Afghanistan. We need a defense secretary, Secretary Panetta is now having to go over to Brussels this week, which was supposed to be the coming out party for Senator Hagel as defense secretary, so they are taking on their own Republican senator and I think if you just count the votes right now, they don't have the votes to block.

WALLACE: They have the votes to block, they don't have the votes ...

WILLIAMS: No, they don't -- they don't.

WALLACE: They have the ...

WILLIAMS: They had the votes to essentially have a filibuster ...

WALLACE: Right.

WILLIAMS: ... and they say they are not going to filibuster, but they don't have the votes at the end of next week to block Hagel.

WALLACE: All right, let me -- let me, you talk about the information that they want, you say they are moving the goal posts, if you will. Bob, as somebody who knows a little bit about cover-ups, are you a little surprised about the fact that we still don't know what the president was doing on the night of September 11th, and we still don't know who he called, what he did, that he only talked to the Pentagon, the defense secretary, once, that he never called anybody in Libya, and are you also surprised -- I'm not saying -- I'm astonished, at the idea that the Congress has never been given, the administration has refused to give Congress the FBI interviews with the survivors of Benghazi.

WOODWARD: Well, those are good questions, there are always unanswered questions in something like this, but the Hagel confirmation is not the forum to get that kind of information. I think there is another dimension here and that is, what are Democratic senators really thinking about the Hagel nomination? I understand some of them have actually called the White House and said, is Hagel going to withdraw? Would he consider withdrawing, the answer is an emphatic "no", but, remember, John Erlichman, Nixon's aide used to talk about twisting slowly in the wind, and the factor here is time and there is this twisting in the wind aura to all of this, and I wonder whether the Democrats are kind of looking and asking what really is the fundamental question here, is he the best person to be secretary of defense?

WALLACE: All right. We have to take a break here, but when we come back the fight over spending comes down to the wire, with the sequester deadline less than two weeks away.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. STENY HOYER, (D-MD), MINORITY WHIP: Everyone should be clear that sequestration is a Republican policy and it is a bad policy.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: The sequester was the president's idea. His party needs to follow through on their plans to replace it.

(END VIDEO CLIP)

WALLACE: House Speaker John Boehner and Democratic Whip Steny Hoyer, still no closer to a deal to avoid $85 billion in spending cuts on March 1st and we're back now with the panel.

Bob, as the man who literally wrote the book about the budget battle, put this to rest: whose idea was the sequester and did you ever think that we'd actually get to this point?

WOODWARD: First of, it was the White House, it was Obama and Jack Lew and Rob Nabors who went to the Democratic leader in the Senate Harry Reid and said this is the solution, but everyone has their fingerprints on this and it is everyone's - it is the policy and it is law, what is important about it is, it is a governing travesty. The idea that you are going to go around and in random ways just cut things, it would be like a family that has to cut their budget, saying, oh, let's cut the medicine that keeps the children alive. It is stupid.

WALLACE: Kim, having said that it is stupid, what are the chances that we're actually going to reach March 1st and that the sequester, the 85 billion in automatic cuts, will kick in and if it does, and if we begin to see, markets reacting and stuff, how does it play out with the president insisting there have to be tax hikes on the rich, and, the Republicans saying, no, it all needs to come out of spending cuts?

STRASSEL: I think it is very likely that we do hit that day. And that it comes, and the reason why is because, the Republicans have been asking the White House to come up with some sort of alternative, which you actually prioritize, look forward, maybe, do something on entitlements. They won't do that.

WALLACE: Well, wait a minute. Now, Senate Democrats came up with a plan ...

STRASSEL: The tax hikes.

WALLACE: It partly cuts, but, yes, also tax hikes, half and half.

STRASSEL: And the Republicans have said, look we just did tax hikes, we did tax hikes a month ago. You know, now it's time you can tax everybody 100 percent of their income at the higher end and it's not going to deal with this. We have to have our main focus on the spending problem. Now, the question is going to be how the White House decides to implement this and whether or not they're going to play really big games, because the temptation for the White House here is going to be there is some latitude in how you can actually put these cuts into effect and you can do them in a way that doesn't hurt as much, but their temptation is going to be to just make it as painful as possible, sort of like what school districts do, they always cut the fine arts programs or the school busing to make the parents want to cough up the money that the school district ...

WALLACE: Let me bring money here -- because, I mean the White House has already put, it's going to be kids, thousands of kids thrown out of Head Start, we won't have food safety inspectors to make sure our food is safe. You know, all kinds of dire things, small business won't get any kind of loan guarantees. So, they are saying we'll make it hurt.

WILLIAMS: Oh, yeah, and I think the news media will play into that at every level, but I think the big ticket here is you are cutting jobs, you are cutting millions of jobs around a country and you are damaging the economy. So, stupid as Bob said is a good word for it. It is taking a hatchet to the economy, the moment when the economic recovery, no matter if you are Republican or Democrat, by everybody's estimates is in a fragile state. So, that doesn't make sense. Now, the president says, you know, like look back to the negotiations he was having with Speaker Boehner. He says a lot of those proposals are still on the table, we can get back - because they have a three month delay, let's kick the can down the road a little farther and let's make it -- let's avoid the sequestration ...

WALLACE: We just had a two-month delay.

WILLIAMS: Right. Well, that is the way we apparently govern now in Washington, we go from one crisis to another. The question is when you bump up against it, when you come up against the debt ceiling, when you come up against the fiscal cliff, usually we put it off, but I think this is one that is going to cause tremendous damage and the question is ...

STRASSEL: $85 billion.

WILLIAMS: ... with the Congress gone for a week when do they have time to negotiate?

STRASSEL: $85 billion in a $3.5 trillion budget.

WILLIAMS: Right. It's a small percentage, but if it affects you ...

STRASSEL: The idea that this is going to hurt the economy?

WILLIAMS: Well, if you lose your job, I think it hurts you, don't you think?

STRASSEL: Well, I mean, fundamentally, the debt that we have at the moment is the bigger problem for the economy and job creation. And the president ...

WALLACE: Let me bring Karl in here. One, to talk about the sequester, but also, in a bigger sense, look at the president's State of the Union speech and the agenda he laid out and what does that tell us about what he wants to do in his second term.

ROVE: Spend a lot of money and pursue a lot of liberal social policies and it also says that he's out of touch with the reality of where the country is, the Democrats have spent the last week going around and saying, we don't have a spending problem. It's on the Fox poll 83 percent of the American people say we've got a spending problem. I agree with Kim, $85 billion cut is a 2.4 percent cut, roughly out of this year's budget. It's a chunk, but a lot of families have had to cut deeper and it is an $85 billion cut in government spending when we have a $16 trillion economy. The administration is right to say that there will be some problems with the across-the-board hair cuts, that's why the Republicans and the House have been talking about - in this -- continuing resolution to fund the government that's going to follow within a matter of a couple of days including flexibility for the president and the administration to move money around between accounts to accounts. You've got to ship building account at DOD, that's spent out for the next five years, allow them to take some of that money and put it into maintenance and operation so they can keep the fitness of our current services.

But, look, let's be honest about this. This was a bad idea foisted upon us by the president of the United States, who has had 18 months to lead the country in a way that we could make smart cuts, not stupid cuts. We cut -- we cut $600 billion -- we added $600 billion in tax revenues in January. The president ran, last year, a television ad saying, for every dollar in new revenues, we ought to have $2.50 in spending cuts. And now where are we? We're talking about replacing the $85 billion, mostly with revenues.

WILLIAMS: How do you call this the president's sequester?

ROVE: Because...

(CROSSTALK)

WOODWARD: The White House doesn't dispute it, and they -- and they -- and they really don't want to talk about the origins of the sequester now.

But the Republicans definitely have a role in this. But I think we're missing -- this is where you have to look at the trees. In the mandated cuts -- let's just take the National Institutes of Health, 5 percent cuts. This -- this is one of the crown jewels of American science, what has -- what the NIH has done in these grants, and a 5 percent cut is going to be devastating to them.

WALLACE: But couldn't you do $85 billion in cuts that wouldn't be devastating?

(CROSSTALK)

WOODWARD: No, because it...

(CROSSTALK)

WOODWARD: But it's mandated in law and the White House has said...

WALLACE: That's the point of the House Republicans. They're saying make smart cuts, not stupid cuts.

WILLIAMS: And you go back to the point I was trying to make before, Republicans in the House, most Republicans in the House, including the speaker, voted for this.

(CROSSTALK)

ROVE: ... deal with the president. But look, here's the deal. Republicans now are for the sequester because they have no trust, no confidence in the president's willingness to cut spending at all. He had 18 months to lead us and he hasn't. But the fact of the matter is, is that we had tools to avoid the kind of thing we're talking about if Congress will sit down. And the Republicans are willing to grant the Democrat president the flexibility to make these cuts in a manner that he determines and he...

(CROSSTALK)

WOODWARD: There is some movement behind the scenes on this. I think some of the Democrats have gone to the White House and said, "Now, wait a minute, can we delay this sequester for one year?" And that makes sense. Granted, it's another kicking of the can...

WALLACE: Republicans won't go for that?

STRASSEL: They won't go for it. WOODWARD: Well, they might. And I think -- no, wait a minute; you've got a situation where this is so idiotic. And Juan's right. This is about jobs. It's about the state of the economy.

But don't forget to check out "Panel Plus," where our panel will pick right up with this discussion on our website, foxnewssunday.com. We'll post the video before noon Eastern Time. And make sure to follow us on Twitter @foxnewssunday.

Up next, our power player of the week.

(COMMERCIAL BREAK)

WALLACE: There have been 1,942 senators since Congress started in 1789, just one of the fun facts we learned from our power player of the week.

(BEGIN VIDEOTAPE)

DONALD RITCHIE, HISTORIAN, U.S. SENATE: I tell people I have a front row seat for the best show in Washington. And it is.

WALLACE (voice over): Donald Ritchie is the Senate historian, keeping track of everything it does and why.

(UNKNOWN): The yeas are 59. The nays are 39.

RITCHIE: The Senate does a lot of business by precedent. It's -- you know, it's what it's done before. We have very few rules in the Senate, but we have thousands of precedents.

WALLACE: When the Senate held the impeachment trial of Bill Clinton, staff wanted to know what happened at the trial of President Andrew Johnson in 1868. RITCHIE: One of the questions that came up was, has anybody other than a member of the House ever presented a case against -- on the floor of the Senate?

WALLACE: Ritchie's answer was no.

REP. BILL MCCOLLUM, R-FLA.: He should be removed from office as president of the United States.

WALLACE: So congressmen had to make the case against Clinton, not their lawyers.

Recently, senators have been asking lots of questions about the filibuster and ways to stop it.

RITCHIE: They all recognize that the Senate would be a very different institution. And, quite frankly, they'll say the Senate would be just like the House of Representatives, which is something, of course, the Senate doesn't want...

(LAUGHTER)

WALLACE (on camera): I was going to say that's not a compliment.

RITCHIE: Not in the slightest.

(LAUGHTER)

We have files on filibusters. We have files on bean soup. We have files on every single person who's ever served in the Senate.

WALLACE (voice over): Ritchie took us into the archives of his office, picking a file at random.

RITCHIE: I just pulled out Edward Bartlett, who was the first senator from Alaska.

WALLACE: They also have 35,000 photos, drawings and cartoons of the Senate over the centuries.

RITCHIE: This is a picture of the senators in the 1880s standing on the steps...

WALLACE (on camera): All men.

RITCHIE: Yes, all men.

WALLACE (voice over): And there's this wonderful photo op of a Senate softball game in the '50s with a young Jack Kennedy as the catcher.

Sometimes Hollywood calls. When they were making a movie about Howard Hughes testifying before a Senate committee, they wanted to match the color of the drapes. They also help out reporters.

RITCHIE: The day of the State of the Union we called it a "red ear day" because we were on the phone so much with people calling with questions to try to put something into historical context.

WALLACE: The historian's office opened in 1975, just after Watergate.

RITCHIE: The legislature was asking the president to make his papers public and then historians said, well, what are you doing about your papers?

WALLACE: Ritchie joined the staff a year later and became Senate historian in 2009.

RITCHIE: I'm in an institution where Henry Clay and Daniel Webster operated, where their desks are still there. I'm looking at the past, but I'm also watching the present as it's unfurling.

WALLACE: Forty-five senators are now serving their first terms. In a period of dramatic turnover, Ritchie is gratified to be part of the body's institutional memory.

RITCHIE: My main objective is to make sure that the people who are in power have accurate information to base their decisions on. And any time that I have been able to provide something that I think helps them is something that I get great satisfaction out of.

(END VIDEOTAPE)

WALLACE (on camera): I asked Ritchie what are the big changes in the Senate over the past half century. He said jet travel, making it easier to commute from their states; the televising of the Senate, starting in 1986; and lots more security.

And that's it for today. Have a great week, and we'll see you next "Fox News Sunday."

Content and Programming Copyright 2013 Fox News Network, LLC. ALL RIGHTS RESERVED. Copyright 2013 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.